All I want for Christmas is to shop online

Making an online purchase

As the holiday season descends, shoppers around the globe are prepping their gift checklists and mapping out where they can shop the best bargains.

According to the National Retail Federation’s annual survey conducted by Prosper Insights, 137.4 million, yes, million, Americans are planning to shop or considering shopping during Thanksgiving weekend. That is nearly six in 10 Americans.

What’s even more eye-opening is that those 137.4 million American consumers plan to spend an average of $935.58 during the holiday shopping season this year, with an average of $139.61 spent on themselves, up 4 percent from 2015 and marking the second-highest level of personal spending.

But with the crazy Thanksgiving and Black Friday shopping mayhem, are Americans willing to go out and possibly be trampled in actual brick-and-mortar stores, or will they turn their attention toward online shopping and Cyber Monday spending?

According to Nielsen’s 2016 holiday trend report, e-commerce retailers stand to benefit from shoppers’ continued affinity for online shopping because consumers across all generations are spending more online, and millennials are leading the way, with 25 percent of millennials planning to increase their online expenditures this holiday season. Overall, there is expected to be a 2 percentage point increase in online holiday shopping, up from 17 percent in 2015 to 19 percent in 2016. Jordan Rost, vice president of consumer insights at Nielsen, notes:

“With a growing appetite for all things digital, online platforms will have a more significant role in helping consumers both research and purchase gifts during this holiday season. Retailers take note, virtual environments present opportunities and unlimited growth potential for merchants — especially with the millennial, digital consumer.”

One thing that could put a damper on holiday spending is the presidential election. According to an analysis released Nov. 17 by Adobe Marketing Cloud, of 18.1 billion visits to retail websites, online sales rose 1.3 percent between Nov. 1 and Nov. 14, well under the 7.8 percent that had been forecast. Most of the decline happened after Republican Donald Trump’s upset victory over Democrat Hillary Clinton. By Adobe’s reckoning, businesses lost out on more than $800 million in sales. Tamara Gaffney, principal analyst and director at Adobe Digital Insights, notes:

“Instead of the expected 11 percent year-over-year increase, we expect growth to fall to single digits this year. Sales on Thanksgiving Day and Black Friday will be an important indicator of how much sales expectations need to be adjusted this shopping season.”

Here’s hoping turkey, dreidels and jingle bells get consumers in the holiday spirit, so sales are boosted and the economy is supported. I know I’m looking forward to shopping the deals from the comfort of my own home.

For more information on the rise in e-commerce and how it is affecting the industrial industry, see “The new retail” in the December issue of Institutional Real Estate Americas.


DenisewebfinalThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Denise DeChaine is special projects editor of Institutional Real Estate, Inc.

Turkey: upwardly mobile and streets ahead

Ankara Atakule

Turkey might not be the safest or most stable place in the world after recent events, but that doesn’t stop the country topping the global house price growth charts.

Knight Frank’s Global House Price Index for second quarter 2016 shows house prices in Turkey grew by 14 percent in 12 months through June 30, a fall from the 19 percent annual number in the previous quarter but still enough to keep the country — seen as a bridge between Asia and Europe but whose loyalties and place in the world are being tested by a number of political and socioeconomic pressures — on the top of the global table.

On an inflation-adjusted basis, though, Turkey’s 7 percent plus inflation rate would see it slip to 13th place in the index, and New Zealand would take top place.

Established in 2006, the Knight Frank Global House Price Index allows investors and developers to monitor and compare the performance of mainstream residential markets around the world. The index is compiled on a quarterly basis using official government statistics or central bank data. The top 10 in the index, which covers 55 countries, is given below.

Knight Frank Global House Price Index, Q2 2016
Change between Q2 2015 and Q2 2016

  1. Turkey, 13.9%
  2. New Zealand, 11.2%
  3. Canada, 10.0%
  4. Chile, 9.4%
  5. Sweden*, 8.9%
  6. Malta**, 8.8%
  7. Austria, 8.1%
  8. Iceland, 8.1%
  9. Mexico, 8.0%
  10. Germany, 7.9%

* provisional
** asking prices
Source: Knight Frank

Although Turkey is not flavor-of-the-month among world governing bodies and leading economies, due largely to the Islamist-leaning policies of its hardline and erratic president, Recep Tayyip Erdoğan, and his over-the-top reaction to the recent attempted coup, it remains a country with a high GDP growth rate, a rapidly growing population, a high level of urbanization, a burgeoning middle class and all the demands of upwardly mobile and increasingly prosperous people — including a natural wish for better residential housing. Lower economic growth in recent years has seen a fall back in the volume of new residential construction, resulting in the price rises seen in the Knight Frank index.

One cautionary note: anecdotal evidence suggests a significant element of the residential housing in Istanbul, with a population of 14 million Turkey’s largest city and which uniquely in the world straddles two continents, has been built illegally and does not meet modern earthquake standards. Like other high-risk earthquake locations around the world, Istanbul is waiting nervously for the “Big One.”


RichardFlemingThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Richard Fleming is editor of Institutional Real Estate Europe.

Cautious sentiment prevails in Asia Pacific

Conditions in the commercial property sector remain challenging across Asia Pacific, according to the Second Quarter 2016 RICS Global Commercial Property Monitor. India and Japan are the only two markets in Asia Pacific in which both the occupier and investment index readings are in positive territory, according to the Royal Institution of Chartered Surveyors.

The commercial property market in Australia remains relatively subdued. While occupier demand is broadly stable, availability continues to rise, depressing rental expectations, reports RICS.

The Singapore commercial property market is headed for further decline, with chartered surveyors predicting rents contracting in the next 12 months. Sluggish GDP growth and weak performance in the services sector continues to weigh on occupier demand. In response, landlords are increasing incentive packages to lure tenants, though this is expected to have little effect on demand. Investor demand in Singapore fell for the fourth consecutive quarter despite improvements in credit conditions compared with first quarter 2016. Only the office sector witnessed a rise in interest from potential buyers, though overall expectations remain gloom-ridden.

Having shown tentative signs of stabilizing in the first quarter, both the Investment and Occupier Sentiment Indices turned negative once more in China. The availability of leasable space rose at the sharpest quarterly pace since 2009, while occupier demand fell, albeit slightly, across all sectors. Excess supply continues to dampen the outlook for rents and capital values, with respondents expecting both to fall significantly across secondary locations. However, prime market segments are likely to prove more resilient.

In Hong Kong, slow economic growth weighs on the outlook for rents and capital values. Retail volume has continuously dropped for several quarters and rent will likely remain flat for the next year. While prime office values and rents are anticipated to hold steady, secondary units are likely to post modest declines on an annual basis.


AndreafinalwebThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Andrea Waitrovich is editor of IREN and web content editor of Institutional Real Estate, Inc.

The world’s best and worst places to live

The Melbourne skyline looking across the Yarra River

If you live in Melbourne, Australia, congratulations! For the fifth consecutive year, your city ranks No. 1 on The Economist Intelligence Unit’s Global Livability Ranking, which scores 140 cities across the globe on livability.

Livability scores are based on weightings for the lifestyle challenges of Stability (25 percent), Healthcare (20 percent), Culture & Environment (25 percent), Education (10 percent) and Infrastructure (20 percent). With Stability, threats of terrorism and social unrest were key to the decline in livability rankings for 29 of the 140 cities surveyed, a drop of 20 percent during the past 12 months.

Cities in Australia and Canada grabbed six of the 10 top spots for livability. Here are lists of the top 10 most and least livable cities, according to the report:

Top 10 most livable cities
1. Melbourne, Australia
2. Vienna, Austria
3. Vancouver, Canada
4. Toronto, Canada
5. Calgary, Canada (tie)
5. Adelaide, Australia (tie)
7. Perth, Australia
8. Auckland, New Zealand
9. Helsinki, Finland
10. Hamburg, Germany

Top 10 least livable cities
1. Damascus, Syria
2. Tripoli, Libya
3. Lagos, Nigeria
4. Dhaka, Bangladesh
5. Port Moresby, Papua New Guinea
6. Algiers, Algeria (tie)
6. Karachi, Pakistan (tie)
8. Harare, Zimbabwe
9. Douala, Cameroon
10. Kiev, Ukraine

The report also looks at the cities with the biggest five-year livability score gains (Dubai, Warsaw and Honolulu) and declines (Detroit, Moscow, Paris and Athens).


Jennifer-Molloy91x119The views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Jennifer Molloy is senior editor of Institutional Real Estate Asia Pacific.

Star power

Every year, Institutional Real Estate, Inc. teams up with Property Funds Research to survey real estate investment managers from around the globe for a Global Investment Managers report. We survey them on their assets under management, how many vehicles they have, where they invest globally and so forth.

This year’s survey showed a number of managers enjoyed double-digit growth in AUM during the past year. The industry’s top two largest investment managers, Brookfield Asset Management, with $149.8 billion in AUM as of year-end 2015, and The Blackstone Group, with $147.6 billion in AUM, recorded growth of 19 percent and 22 percent, respectively, based on figures reported in the prior year’s survey. The two behemoths continue to outpace others in the industry, as there is a growing and sizable gap between them and the other largest investment management firms.

This year’s report captures data on 194 real estate investment managers around the globe. As a group, they control nearly $2.8 trillion of real estate assets. Also indicative of the jump in AUM, the top 10 largest managers, as a group, experienced a 12 percent increase from the previous year; the top 100 managers recorded a 14 percent increase.

Similar to years past, the data shows a strong concentration of assets held by the industry’s largest firms. The Big Two — Brookfield and Blackstone — account for 10.6 percent of the collective AUM reported by the 194 firms in the survey. The top 10 firms represent 33 percent of aggregate AUM, while the top 20 investment managers account for 53 percent.

For more trends and a more in-depth look into the report, click here. There is also a version that tracks assets in euros, available here.


DenisewebfinalThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Denise DeChaine is special projects editor and video production specialist with Institutional Real Estate, Inc.

Infrastructure debt outperforms

Infrastructure debt ranks better than many non-financial corporate debt offerings, according to Moody’s fourth annual report on the historical credit performance of all rated infrastructure debt (1983–2015).

The report updates Moody’s previous study on infrastructure default and recovery rates published in March 2015; its key findings with the expanded data set are generally consistent with the previous study, confirming infrastructure debt’s comparatively solid performance.

Moody’s infrastructure ratings are assessed on expected loss and on that measure are predominantly investment-grade — 92 percent of total infrastructure ratings held an investment-grade rating compared to 41 percent for NFC ratings as of Dec. 31, 2015.

For more, see “Infrastructure debt gets high marks second year running.”


DrewWebsiteThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Drew Campbell is senior editor of Institutional Investing in Infrastructure.

California developers look ahead

California commercial real estate continues to strive, but hints of slowing economic growth are a possible concern, according to the Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey. The biannual survey projects a three-year-ahead outlook for California’s commercial real estate industry and forecasts potential opportunities and challenges affecting office, multifamily, retail and industrial sectors.

For each of the six markets surveyed (San Francisco, the East Bay, Silicon Valley, Los Angeles, Orange County and San Diego), the trend in office developer sentiment has declined since its peak in 2014. This downward trend occurs as developers become more pessimistic about the growth of real rental rates and vacancy rates.

Mulitfamily developer optimism has remained strong and consistent over the previous four years that it has been included in the survey. The demand for multifamily housing tends to follow job growth in the more densely populated regions of California. Overall, the survey anticipates a 25-year high in multifamily construction during the next three years. Unlike office space, there is no evidence of a slowdown in new multifamily development.

For more on the survey, see “California developers show signs of pessimistic concerns.”


AndreafinalwebThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Andrea Waitrovich is editor of IREN and web content editor of Institutional Real Estate, Inc.

Smart people, smart cities, affordable housing

Entrepreneurs keep getting more ambitious, especially those in the technology space. They seem to think they can solve any and all of the world’s problems.

Now a pair of Silicon Valley entrepreneurs is aiming to tackle the most essential component of a functional society — the city. One half of that tandem is Sam Altman, president of Y Combinator, an organization that funds early-stage startups. His partner in urban planning is Adora Cheung, the co-founder of now-defunct startup Homejoy, a house-cleaning company that fell short of its customer acquisition targets. In their quest to create a prototype smart city, Altman and Cheung have used a blog post to put forth their concept and to issue an open invitation to others with bold ideas to contribute.

Their primary objective is to find ways to create affordable housing. Altman and Cheung write: “How can we make and keep housing affordable? This is critical to us; the cost of housing affects everything else in a city.” Answering those questions is considered the “first phase” of their project. Step two, finding a “blank slate” on which to build.

“We’re seriously interested in building new cities,” their posting says, “and we think we know how to finance,” though they don’t disclose that piece of financial magic.

Vanity Fair magazine, which gave coverage to the Altman/Cheung plan, notes leaders of tech companies have long fantasized about building their own communities centered around technology. Venture capitalist Peter Thiel once proposed a project called Blueseed, based out of his Seasteading Institute, to establish a floating libertarian island off the coast of California. Earlier this year, Alphabet CEO and Google co-founder Larry Page met with Dan Doctoroff to discuss the creation of a futuristic, tech-based city, code-named Project Sidewalk. Doctoroff, a businessman, philanthropist and former member of Michael Bloomberg’s mayoral administration in New York City, now serves as CEO of Sidewalk Labs. The startup aims to develop technology focused on city life.

Altman and Cheung stress their smart city project will be for everyday people, whether technologically savvy or non-technically inclined. They note: “We’re not interested in building ‘crazy libertarian utopias for techies.’ ”


MikeCfinalwebThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Mike Consol is editor of Real Assets Adviser.

More signs of a Bay Area tech bubble

Signs of a technology bubble in the San Francisco Bay Area are increasing.

This past January, Institutional Real Estate Americas published a timely piece called, “Unicorn hunters: Technology-driven property markets have outperformed in the current expansion.” The article provided a well-balanced review of tech markets’ current outperformance and did point toward rising risks in the market. In the article, author Loretta Clodfelter, editor of Institutional Real Estate Americas, noted:

“The City by the Bay has seen the biggest growth in high-tech software/services jobs from 2012 to 2014 — an increase of 42.7 percent, equating to some 16,976 new jobs and 55.1 percent of all new office jobs during the period, according to CBRE’s Tech Thirty report. The San Francisco office market also has had the greatest increase in rents, which were up 30.7 percent from mid-2013 to mid-2015.”

Later in March, Bloomberg noted, in a piece called “Tech Slowdown Seen in San Francisco’s Commercial-Property Market”:

“Office subleasing, an early indicator of past downturns, is at the highest level since 2010. The amount of available space from subleases in the city jumped to 1.9 million square feet (176,500 square meters) last month, a 46 percent increase from the end of the third quarter, according to a report from Cushman & Wakefield Inc. Twitter Inc., Intuit Inc., and Zenefits are among tech companies putting excess space on the market.”

The article goes on to point out:

“The largest share of space on the market is from companies that are contracting or consolidating, according to Cushman & Wakefield. As of the end of last year, about 55 percent was from the technology industry.”

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the Haas School of Business at the University of California – Berkeley, summed up the situation very well in the article. He was quoted saying:

“We’re going to have a correction in the job market in San Francisco over the next several years. We had an economy that was growing based on the availability of capital rather than the fundamental performance of some of the companies.”

Another Bloomberg story provides additional support for concern regarding the health of the tech market. A video report titled, “This Could Be the End of the Tech Boom,” made the following points in May:

  • Just one tech IPO has happened this year.
  • The last lowest tech IPO year was 2008, when six went public; we could set a new record this year.
  • There are more than 150 unicorns, which are start-ups valued at $1 billion or more, and a number of them would like to go public.
  • The question is: How long can they afford to wait?

Clearly, there are some red flags in the market. As we all know, cycles tend to surprise us on duration on both the upside and downside. We may have more to run, but plenty of other cautionary examples in the market today make a good case for being more conservative going forward in tech-related real estate in the San Francisco Bay Area.


JohnHunt91x119The views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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John Hunt is conference program manager with Institutional Real Estate, Inc.

Farm to portfolio

Nebraska Cornfield

Real assets of all stripes are getting noticed by investors these days; with returns under pressure across all asset classes, the appeal of investments that can provide steady cash yields is growing. One of the real assets getting attention more recently from institutional investors is agriculture.

According to Agriculture: A New Asset Class Presents Opportunities for Institutional Investors, posted by Global AgInvesting, only 0.5 percent of the total value of farmland globally is held by in institutional portfolios; however, institutional investment in farmland has been growing annually at 8 percent to 10 percent. The report notes:

“While most investment has been concentrated in row cropland land in North and South America, institutional appetite for agricultural investment in Australia and Eastern Europe is increasing, as well as interest in permanent crops.”

Row crops, as the name suggests, are grown and tended in rows and include corn and soybeans, while permanent crops include such things as fruit, nut and olive trees, and vineyards.

Many investors with experience in timberland investing, an asset class with similarities to agriculture, expanded into agricultural investments between 2005–2008 as commodity prices rose, buying farmland to primarily grow row crops in North and South America — and the early interest in the sector has continued. The report notes:

“HighQuest estimates that over the past decade about $45 billion of institutional capital has been invested globally in farmland. As recently as November 2015, TIAA raised a $3 billion fund, which included internally generated funds as well as limited partnership contributions from peer institutions.”

As for the future, the report notes while farmland is an immature asset class compared to timber, the investable universe for farmland is more than three times the size of that for timber, and there is room to grow:

“This explains why many traditional institutional timber investors have already invested in farmland, or are currently considering doing so.”


DrewWebsiteThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Drew Campbell is senior editor of Institutional Investing in Infrastructure.